By virtue of the authority vested in me by sections 5303, 5304, and 5305 of title 5, United States Code, and as President of the United States, it is hereby ordered as follows:

Part I--General Policy

Section 101. Heads of agencies are directed:
(a) To make full use of the authorities in chapter 53 of title 5, United States Code, and the statutory pay systems to which section 5301 of that chapter refers to secure and maintain the high quality of Federal personnel necessary for an effective and efficient Government service;
(b) To use these authorities to (1) motivate employees to perform continuously at their full capacity, and (2) provide fair treatment in pay matters of all employees subject to the statutory pay systems; and
(c) To take appropriate measures to ensure that the Government receives full value for its expenditures for salaries and that every employee is paid no more than is warranted by the nature of his assignments and the degree of competence with which he performs them.

Sec. 102. As used in this order, the term "agency" has the meaning given to it by section 5102(a) of title 5, United States Code.

Part II--Annual Pay Review

Sec. 201. The Secretary of Labor, the Director of the Office of Management and Budget, and the Director of the Office of Personnel Management are hereby designated to serve jointly as the President's agent under section 5305 of title 5, United States Code, and shall be known in this capacity as the President's Pay Agent.

Sec. 202. The head of each agency employing personnel under the statutory pay systems (as defined in section 5301(c) of title 5, United States Code) shall provide such information and technical assistance with respect to the statutory pay systems applicable to his agency as may be requested by the President's agent in carrying out the provisions of section 5305 of title 5, United States Code.

Sec. 203. The following agencies are designated under section 5305(q) of title 5, United States Code, to prescribe the rules necessary to convert the rates of basic pay or salaries of officers and employees to the new pay rates as adjusted for each statutory pay system under section 5305 of title 5, United States Code:
(i) General Schedule--the Office of Personnel Management;
(ii) Foreign Service schedules--the Department of State;
(iii) Schedules for the Department of Medicine and Surgery of the Veterans Administration--the Veterans Administration.

Sec. 204. (a) The Advisory Committee on Federal Pay shall advise the President of its own opinion on any unresolved issues referred to it by the President's Pay Agent or the Federal Employees Pay Council. The Advisory Committee shall inform the President's Pay Agent and the Federal Employees Pay Council of its opinion on such issues as soon as practicable. To facilitate the exercise of this authority and the early resolution of such issues, the Advisory Committee shall attend, or be represented at, meetings between the President's Pay Agent and the Federal Employees Pay Council, and moderate and direct the discussion.
(b) The President's Pay Agent, in its annual report to the President pursuant to section 5305 of title 5, United States Code, shall include a full discussion of each issue upon which the Advisory Committee has submitted, in accordance with subsection (a), an opinion.

Sec. 301. (a). The Office of Personnel Management is hereby designated to exercise--

(1) the authority of the President under section 5303(a) and (b) of title 5, United States Code, to establish or revise higher minimum rates of pay, and

(2) the authority of the President under section 5303(d) of title 5, United States Code, to prescribe conversion rules for adjusting an employee's pay.

(b) Before exercising these functions for positions compensated under the Foreign Service schedules or under the schedules for physicians, dentists, and nurses in the Department of Medicine and Surgery of the Veterans Administration, the Office of Personnel Management shall consult with the head of the agency concerned.

Sec. 302. (a) Before establishing higher rates of pay under section 5303(a) of title 5, United States Code, the Office of Personnel Management shall consider whether--

(1) an adequate recruiting program has been implemented and that attention has been given to the improvement of working conditions and to other relevant factors; and

(2) adequate recruitment or retention cannot be achieved by alternate means such as job redesign or skills improvement training programs.

(b) The Office of Personnel Management may not establish higher rates for all positions in a statutory grade or level in a given area unless the Office determines that adequate recruitment and retention cannot be achieved by establishment of higher rates for certain occupations or groups of occupations.

Sec. 303. The Office of Personnel Management shall review, at least annually, higher rates of pay established under section 5303(a) of title 5, United States Code, and shall continue, abolish, or revise the higher rates in consideration of the facts and pertinent criteria under the law and this order.

Sec. 304. An employee's basic pay rate may not be reduced solely because of a revision to, or cancellation of, the higher rates established under section 5303(a) of title 5, United States Code.

Part IV--General Schedule System

Sec. 401. (a) Heads of agencies shall ensure that agency managers and supervisors at all levels use the position classification plan of the General Schedule system as a tool for effective and efficient human resources utilization.
(b) The Office of Personnel Management shall revoke the position classification authority of an agency under the General Schedule whenever the Office finds, in connection with its regular evaluation, or otherwise, that an agency has failed to classify its positions in accordance with or consistently with applicable standards.

Sec. 402. The Office of Personnel Management shall issue such regulations and standards as may be necessary to ensure that only those employees whose work is of an acceptable level of competence receive periodic step-increases under the provisions of section 5335 of title 5, United States Code.

Sec. 403. (a) The Office of Personnel Management shall require each agency employing personnel under the General Schedule to establish a plan for granting additional step-increases in recognition of high quality performance under section 5336 of title 5, United States Code, and shall require that the plans (1) be as simple as practicable, (2) provide for delegation of authority to an appropriate management level, (3) seek to ensure fairness to all employees, and (4) provide for informing employees, at least annually, of the number of additional step-increases granted in their agencies.
(b) The Office of Personnel Management shall (1) establish such regulations and standards as it deems appropriate for agency plans, (2) aid and advise agencies in the formulation and administration of the plans, and (3) evaluate the plans and their operation to ensure that step-increases are granted in a manner that is fair to employees and provides motivation for high quality performance.

Sec. 404. The Office of Personnel Management, in prescribing regulations for higher rates of pay under section 5333(b) of title 5, United States Code, for employees having responsibility for supervision of prevailing-rate employees, shall give effect to the following:
(a) An irregular prevailing rate (such as the saved rate of a prevailing-rate employee not related to his current position) shall not serve to advance the pay rate of a supervisor under the General Schedule.
(b) The relative rate-range of a General Schedule supervisor and a prevailing-rate employee supervised by him shall be considered as well as the specific rate either is receiving at a given time.
(c) Due consideration shall be given to equities among General Schedule supervisors as well as those between a General Schedule supervisor and a prevailing-rate employee supervised by him.